barry minkow

Another victory for Tracy Coenen in the malicious lawsuit filed more than 4 years ago by Medifast (NYSE: MED) related to their Take Shape for Life business unit. In 2011, I was dismissed from the lawsuit following my successful filing and argument of an anti-SLAPP motion. Medifast immediately appealed that decision to the United States … Read more Medifast Victory For Tracy Coenen

For decades, muti-level marketing companies like Amway, Mary Kay, Herbalife, Avon, and Usana have fought against being labeled as pyramid schemes. They say that pyramid schemes are illegal, and that their MLM business format is perfectly legal.

My definition of MLMs is a little nuanced. I tend to call them legalized pyramid schemes. What I mean by this is that multi-level marketing companies are indeed pyramid schemes, but our state and federal governments allow them to operate and generally call them legal if they have the right window dressing.

United States Attorney’s Office
Southern District of Florida
July 21, 2011 Press Release

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, and John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, announced that defendant Barry Minkow, 44, of San Diego, California, was sentenced today on one count of conspiracy to commit securities fraud, in violation of Title 18, United States Code, Section 371, for his participation in a scheme to manipulate the stock price of Lennar Corporation (Lennar) through false and misleading statements about Lennar’s business operations and management. At today’s hearing, U.S. District Court Judge Patricia A. Seitz sentenced Minkow to five years in prison, to be followed by three years of supervised release. In addition, the Court ordered Minkow to pay $583,573,600 in restitution.

A year after the first report on the company was released by FDI, Medifast sued us for $270 million, alleging defamation, criminal conspiracy, unfair business practices, and market manipulation. The defendants each filed anti-SLAPP motions, basically saying that Medifast was attempting to silence critics in violation of our First Amendment rights.

TSFL is a multi-level marketing company which peddles weight loss products. It entices new “health coaches” to invest in the system with claims of “healthy body, healthy mind, healthy finances.” I was critical of this business model, as I frequently am with MLMs.

For nearly two years, Medifast (NYSE:MED) and its lawyers have known that I am not an appropriate target for a lawsuit. Nonetheless, they have pursued their malicious civil suit against me. Since the suit was filed, Medifast has been made aware of all the reasons why they shouldn’t be suing me:

I never said anything false about the company

I’m not aware of anything false that my co-defendants said, and which I later reprinted on this blog (and reprinting the writings of others does not make me responsible for those writings)

Every bit of evidence produced during discovery shows that I was not part of any conspiracy, and that I actually went out of my way to make sure that false statements or assumptions weren’t made or published about Medifast

Two Web sites that investigate business fraud are funded by short selling—placing market bets that the stock of companies they write about will go down. It’s an approach that makes journalism ethicists very uncomfortable.

SLAPP stands for Strategic Lawsuit Against Public Participation. It’s basically when a big company tries to shut up a little guy with expensive litigation. In my opinion, Medifast sued me and others in an attempt to get us to stop publicly analyzing or criticizing the company and it’s multi-level marketing business model.